Keltner Channel

What

The Keltner Channel is a moving average band indicator whose upper and lower bands adapt to changes in volatility by using the average true range. The Keltner Channel is used to signal price breakouts, show trend, and give overbought and oversold readings

How

In Keltner's description the centre line is an 10-day simple moving average of typical price, where typical price each day is the average of high, low and close,

High + Low + Close

TP =    _____________________

3

The lines above and below are drawn a distance from that centre line, a distance which is the simple moving average of the past 10 days' trading ranges (ie. range high to low on each day).

When

The trading strategy is to regard a close above the upper line as a strong bullish signal, or a close below the lower line as strong bearish sentiment, and buy or sell with the trend accordingly, but perhaps with other indicators to confirm.